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Worldwide Exchange

News/Business. Ross Westgate, Kelly Evans. Ross Westgate and Kelly Evans consider the business stories that have global significance. New.

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Boeing 33, Airbus 26, U.s. 24, Us 18, India 13, Mozambique 13, Europe 11, America 9, Spain 8, Citi 7, Alcan 7, Italy 6, Ross 6, Bofa 6, Sam Walsh 6, Faa 6, United 5, Tom Albanese 4, London 4, Rio Tinto 4,
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  CNBC    Worldwide Exchange    News/Business. Ross Westgate, Kelly Evans. Ross Westgate and  
   Kelly Evans consider the business stories that have global...  

    January 17, 2013
    4:00 - 5:59am EST  

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hello. this is today's "worldwide exchange." i'm ross westgate. >> and i'm kelly evans. >> rio tinto shocks the market. the mining giant reveals it will book a $14 impairment charge. and boeing hits more turbulence. this as top rival airbus gets set to report its commercial results within the hour. the biggest retailer in paris talked about sales improving in the fourth quarter because of strength in its two biggest hkts. and bank of america and citigroup will report earnings in the u.s. with mortgage lows expected to weigh on results.
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hello and welcome to today's "worldwide exchange." plenty to get to on the corporate front. maybe things are getting better. >> so much corporate thus. much less of the european central bank crystal ball action. we'll get to all of on those stories. we're going all over the world to bring them to you. rio tinto's ceo steps down ask we'll ask whether the miner's mozambique actions are to blame for his sudden exit. boeing is set to report 2012 orders. here in london, we'll take you from the luxury road to the high street with december sales in focus. and with another set of u.s. bank earnings on tap, we'll
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speak to the former chairman bill isaac. first, rio tinto opened lower this morning after the ceo announced he would step down. the resignation follows a $14 billion impairment charge related to assets in mozambique. the acquisition is one of the biggest operations carried out. he'll be replaced by the iron ore chief sam walsh. let's get the latest reaction from sydney. mac, how is it being viewed? >> thanks very much, ross. you showed us the reaction to the shares in london. this news came out after the sydney market had closed for the trading session. the stock initially down by about 4.5%. but improving, as you just showed us, down about 2.7%. really, you have to say, this is just the final straw when it comes to a series of budgetels as tom albanese has been the ceo
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since 2007 with respect to a series of acquisitions. there's been write-down after write-down. you mention dollars that $14 billion impairment charge that has been announced today that is going to flow through when it comes to the 2012 results. 3 billion of that related to the recent riverside coal acquisition in mozambique. but $11 billion of that associated to the carrying value of its aluminum assets. the company saying its deterioration in the aluminum market in 2012 in certain regions, higher energy costs and raw material costs resulting in a negative impact on the current market values of the aluminum business. but in terms of what the chairman had to say in an announcement today that the $3 billion write-down of those coal assets in mozambique is what he calls unacceptable, tom albanese will be standing down effective immediately. he'll be replaced by the current
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ceo of rio tinto's iron ore operation. those are the iron ore assets in the northwest part of australia. as i mentioned, just the final straw when it comes to write-downs concerning mr. albanese. it was a $38 purchase of alcan at the top of the cycle back in 20307 that scored numerous write-downs including one last year for $8.9 billion. ross, back over to you. >> much thanks for that. >> matt, if you could, i want to get into this point about the alcan acquisition for a second. it was early this time last year that they wrote down the value of that deal from 2007 by half. where in the history of overpaying for deals -- i mean, this has to be pretty close to the top.
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>> yeah. and we should point out that they've sold off a number of those alcan assets, as well, after we got the downturn in 2008, 2009. there essentially was a fire sale with a number of these assets. last year we got the write-down of 8.9 billion of the remaining assets. but you don't have to look too far when it comes to overpaying for assets. bhp, for instance, just in the last 12, 18 months or so buying those shale gas assets in the united states at the top of the cycle. they've already written down the value of those. so significant write-downs coming through from rio tinto has now claimed the scalp of this ceo. it's a stand-alone story. bhp writing down a number of its assets it bought at times that were curiously at the top of the cycle. >> where does this leave the sector? we know going back to 2007, rio
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was looking at alcon to fend off an acquisition by bhp. obviously, market conditions had changed. where is the landscape today? what is the sentiment about some of these major mining companies today and whether there will be further consolidation? >> yeah, well, the price of that that you talked about never got off the ground. not only did it knock off the ground because both parties couldn't agree on a price, but the significant hurdles, the government probably wouldn't allow a tie-up between two of the biggest miners in the country. it's looking not too bad right now. we've had the iron ore price jump up to levels that we haven't seen in more than 12 months. but rio is out with production numbers earlier on this week
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revealing that it's sought strong demand for iron ore innous trail ya over the 2012 calendar year and it is, of course, pressing ahead with massive expansion plans in northwestern australia. just how successful those are, of course, time will only tell. >> great. matt, thank you very much for joining us this morning. fascinating story. >> what's interesting, sam walsh, who is going to replace him on the scene as an operations guy, and it probably looks back at the reason he's going is because they misunderstood the operation or requirements in mozambique. >> they may have overpaid for the assets, but they also underplayed how difficult it was going to be, the infrastructure requirement, right? because they were going to load this stuff on to a barge, take it down the river. the amount of infrastructure they need to put in place they underestimated. >> and the mining partners. they were looking at this as major opportunity and now
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essentially requesting those two. >> if you hadn't had alcan, mozambique on its own wouldn't have been enough, right? >> this on top of that, that's it. we've had enough. >> the question now is whether the shares finally respond positively saying, we'll move this source. >> sorry. >> things fall apart. >> okay. that was symbolic. >> river nation had a fund management will join us today. the other major news story we're following this morning, the federal aviation administration has issued an order temporarily grounded all boeing 787 dreamliners pending a check of the batteries. the faa says the cause of the battery failure is still unknown. united is the only usair line
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with dreamliners currently in its fleet. boeing could have more issues in place with questions by its engineers. the union, the engineer's union presented its best and final contract offer on wednesday. let's take a look at boeing shares now. they are shedding another 3% or so in trade in frankfurt today. they're still roughly up in the last quarter or so. >> yeah. and then the interesting thing here is it's going to take a while to work out the battery problems. the faa is saying they're grounded indefinitely. they're grounded until they can figure out what's wrong and then fix what's wrong. so we are now into -- it's not a couple of days. >> this is weeks. >> let me just remind you, some of the customers, about the fleet, as well.
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united first's 787 domestic flight was on november the 4th. here we are on january the 8th. there's quite a few flights that have been grounded. yes. that is the essential timeline there. >> you can take a look at a lot of the customers and supplies affected by this news. we know we're watching the batterymaker in particular, but we're talking here about the airlines that ordered and in some cases have been delivered. a lot of major airlines listed there. you can see all nippon airways with more than a dozen aircraft. the next biggest is japan airlines which had reported troubles. united is in the air, too. india is looking into trouble. a lot of airplanes are in the pipeline. >> and qatar airways, that is the one where we haven't heard
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anything. if you're now a passenger, right, on the dreamliner and you go off flying, you think twice about it. >> you think twice about it, right. meanwhile, boeing will release its 2012 earnings today. airbus officials reported they received orders for more than 8800 airplanes last year, which is still less than boeing. stephane joins us with a look ahead to this. stephane, is it true what they say about the a380, there is boeing. there were problems with its plane, the dream liner, and if airbus is getting many orders for their a380, people will look at those two huge projects and whether all this investment, all that time, are they paying off
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in the way they thought? >> it's what we call in french. [ speaking foreign language ]. something that ee volumes when you're too young or too new on the market. that's exactly the same thing that happened to airbus. if you remember, they went from a slow crack on the airbus 380 and the planemaker came up with a fix plaster. but the results of these technical problems were the poor commercial results of the airbus 380, the commercial chief for airbus said that the company suggested very low orders for its planes last year because of the technical problems that the plane experienced last year. and that's something very similar to what boeing is likely to experience in the next few weeks. the technical problems with an aircraft are never a good
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publicity inspect is likely to over-shadow the announcement by boeing today will regain its crown of the largest planemaker in the world for the first time in more than three years. airbus is going to announce probably 800 orders for the full year. that will be a significant improvement. but it will be much, much lower than the orders that boeing reported for the latter year. boeing has announced for the latter year, 601 deliveries. the announcement will come very shortly. there's a press conference at 10:30. we will keep you posted. >> thanks for that, stephane, for now. we'll talk to you later. also coming up, we will hear from airbus around 1300 cet. and it's another pair of big
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u.s. bank earnings this morning. before the opening bell, bank of america will release its fourth quarter results at 7:00 a.m. eastern. mortgage-related charges will hit bofa's bottom line. the settlement from fannie mae and other parts of the u.s. government. citigroup reports q4 had numbers at 8:00 a.m. eastern. analysts expect earnings of 96 cents a share on revenues of 19 billion. shares today, we can check on an early frankfurt trade up in bofa's case by 1.25%. citigroup is down by .6%. stewart richardson joins us on the program this morning. how important is what these banks say to you? do you like citi versus bofa or do you like them both relative to the investment banks? what are you thinking here? >> in terms of the banks, operating results seem to be in
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its weak spots. standing results when you strip out some of the exceptional items. we're looking at it from a broad sector point of view. the key for sus they've been in a long repair process which should continue. i think relative to markets, bank overall, big money for the banks will be okay going forward. >> that is wunl of the concerns is that the easy money may well have been made. in terms of price of the value, clearly more expensive than they were a year or so ago. so, yeah, to be putting a lot of money into work today, you have to be aware of the long-term recovery process where the hurdle and the balance sheet performance and earning performance will continue. maybe 2013 won't be quite such a flat year compared to.20 think they're okay relative tos. the markets.
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>> what kind of year to you expect? a lot of people think 2013 will be much stronger in the second half. >> for the economy? i think we have to divorce the economy from the market. >> have we been price thatting that out? >> we have to be clear that markets are totally different from the economy. for the markets, we're looking at 2% scenario. scenario a would be similar to 2012 where i think actually the economy doesn't do that well. the first half is difficult. second half is a bit better. we've still got the fed printing 5 billion a month. we could see a rerun of 2012. maybe mid to single high digit returns. >> did you get exposure of citi
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to bofa here? >> we wouldn't be. we're taking a little bit of money off the table or indeed i think we did. the level of implied volatility makes perfect sense here. >> we'll leave it here for now. thanks very much. over to you, ross. >> kelly, thanks for that. so we are just about an hour and 20 minutes into the trading day here in europe. you can see advancers just about outpace decliners by a ratio of 6 to 4 and we're up near the high point of the session which has dragged us back into prospect on that particular indices. the ftse 100 at the moment is just up two points. a lot of focus on the retailers today. xetra dax down .25%. ibex is up .5% and the cac 40 is up .5%. we keep our focus in the next half hour on the bond auction out of spain.
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we dip below for the first time since march last year. we'll see where we go with this auction. we're looking to auction up 4.5 billion of 2015, 2018 and 20411. if this auction goes fairly well, then they will have issued 9% of their total issuan plans for medium term debt. they are taking advantage of these lower yields that we continue to see and narrow spreads, as well. so we'll keep our eye on these as we go through. on the currency markets, euro/dollar, the euro has been up to 30-month highs against the swiss franc. trying to crawl back some gains. dollar/yen, 88.84. today the yen is a little weaker today on japanese reports minister's saying he was regretful his comments will be misinterpreted.
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aussie/dollar, 1.0517. we begin to focus on what's going on in rio. let's bring you up to speed with the rest of the news out of asia. li sixuan joins us for the first time out of singapore. >> thank you, ross. asian markets finished on a difficult note. the shanghai composite lost about 1% today, extending losses for the second day after krit swiss downgraded china life. the hang seng ending lower by a touch. no curbs were introduced by the executive yesterday. taiwan's taex is down over 1% led by technology shares. tsmc shares ended a touch higher before its results of announce wantme wantments. it posted a 32% jump meeting
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forecasts. but the company expects q1 revenue to fall due to seasonal factors. elsewhere, the nikkei is finished just a tap higher. sharp shares jumped over 7% on the back of tv joint venture talks with chinese lenovo. south korea's kospi ended weaker. the country's producer prices in december fell the most in three years due to lackluster demand. and down under, australia had down beat jobs data. the asx 200 climbed to a 20-month high with banks lending support. india's sensex now trading higher by about .6%. hcl technology rallied to some 12-year high as its earnings beat forecasts. back to you. >> sixuan, we'll see you a little later. still to come on the program,
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christmas sales rocketed, so what is the online retailer doing? we'll get into that when we come back.
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welcome back to the program. shares of carrefour came in just below expectations. shares in france came in shea slower rate prior to the quarter. and ahold has posted a gain after hurricane sandy. customers at its u.s. operations stocked up on consumer staples ahead of the storm. ahold runs giant carlisle super markets in the oouts which generate 60% of the group's sales. i have been a long time customer of stop and shop. i never knew it was owned by another company. >> is it general merchandise? >> yep. it's a big super market. so, yeah, it's interesting, though. 60% of their sales.
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wow. >> meanwhile, it was a happy christmas for british online fashion retailer atoff. 79.9 million pounds in december. as far as the stock was concerned, down slightly. but we get a bit ahead of the news and some taking on it. home retail sales are higher this morning. britain's biggest households retailer raised expectations. this is one unit up 2.7%, although sales home base was down 2.9% which is worse than analyst expectations for the stock, you can see. doing very well, indooet deed, up 17 pence. up over 14%. richard hertz joins us now. not bad numbers today from asos and home retail group, as well. how do you define the winners and losers from the christmas
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trading? >> difficult to generalize. it's not been a bad christmas. and i think we've got to see retail sales up on value and volume terms. those figures are better than we've seen for a long time. but i think part of that comment suggests to me that they didn't have as much -- >> not every comment is a competitor. >> absolutely. it's a no longer retailer. and we know tesco thinks badly. so i think asos has been given some breathing space. asos figures are superb. a real surge over christmas, i think. we weren't seeing figures like that earlier in the year. but it has been an online christmas. and actually, the winners in terms of sales growth as we've seen so far have been the multi channel retailers. fantastic figures from the likes of john dose, very, very good, indeed.
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>> if you didn't have that good multi channel line or you weren't very good online, then you weren't going to suffer. >> it's much, much more challenging at the moment. you can generalize, consumers are much more selective. they don't give second best the benefit of the doubt. it would be interesting to know, for instance, how those changes we've got -- >> i have to say, if i had to pick a word to describe retail sales and the general economy, it would be sporadic. it doesn't seem there's a consistent message, a theme, a story. am i missing something? >> i think it's fair. i think we saw in 2012 very, very slow improvements in consumer confidence and retail sales are up compared to other areas of consumer spending were weak. and i think it will be much the same next year. but have a look at the rest of europe. >> so you would rather buy the uk companies? >> well, i don't make share price recommendations. but the uk economy at the moment
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subject to no euro meltdowns. >> although we have had similar stories. we've had hmv, blockbuster and jaccards. all of those businesses have gone into administration. >> the point is, they all have in common the fact that technology has changed and they were unable to respond. >> richard, thanks so much for joining us. and some news on a big corporate story this morning, the ongoing troubles with boeing.now japan airlines says it has canceled all flights on its tokyo to san diego route and it will cancel eight flights between january 9th and 25th due to the dreamliner grounding. 70 flights will switch aircrafts. this is interesting as we wait for airbus results. the 787 dreamliners grounded
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pending safety reviews. >> they're grounded indefinitely in the u.s., right? so they're not flying until we know what's happening. still to come, how boeing's dream liners are coping around what we've already heard there. jal is going to try to switch to different planes. why future customers are standing by their planes. what are you doing? nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go... we got clients in today. [ male announcer ] save on ground shipping
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at fedex office.
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right now, the focus is on boeing. they took 914 orders last year, airbus, that is. cancellations netted out, orders were 833. they're targeting more than 600 deliveries and 700 gross orders in 201. they are maintaining their mid 2013 target for the a-350 first flight. as far as the a380 is concerned, they sold nine of those in 2012. they're targeting 25 orders and 25 deliveries in 2013. and 30 deliveries in 2014. they say they're confident they will maintain output during the
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transition to the new version of the a-320, as well. >> we are seeing snazzy pictures there going on. they're clearly ready to take the stage, talk about their outlook and while not addressing necessarily, you're seeing there some of what this presentation involves. >> i wonder if they're worried about them hosting this with boeing's problems. >> that is the solution to watch and see whether they alter the tenor at all or as you would see here, kind of going ahead with their snazzy -- >> they're saying we have no control but we go on with it, you know? this is nod a bad time to talk about what they're doing when your competitor is having difficulties. they went through it last year. european markets are trying to head higher. we're flat on the xetra dax.
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firm on the ftse 100. cac 40 and ibex are up .5%. >> let's take a look at what's happening on the spanish ten year. it's just above 5 ers. italy, 4.14%. i feel like we've been saying these levels for weeks now, about 1.5% and 2% respectively there. you can see the rotation into the periphery as the euro is hitting a nine-month high against the pound. >> and rio tinto shares are down after the ceo said he would step down after a $14 billion impairment charge. richard joins us now. do we mention, as well, they're speaking of the airbus conference, as well? and then we get to rupert. thanks for joining us.
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if there hadn't been alcan, would mozambique's acquisition have been enough? was it the two together? was it accumulation? >> well, there might be, yes. alcan was nothing short of a disaster. it's been extensive. and i think just the aluminum sector as a whole has performed dreadfully. the times was most university. >> why should we feel story for him? he laid out a strategy and it went wrong. >> unfortunately, the crystal ball didn't show that we're going to see the gsc. that's the simple reality. and other companies but for the grace of god, for instance, xstrata with london, for instance. it's unfortunately timing. but the reality is that 14 billion -- >> and it came out of nowhere, right? no one was suddenly expecting a
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$14 billion impairment charge. right? >> i don't think it came from nowhere. i think it has been bubbling away for a while now. but combined with the mozambique issue and the fraction volumes have been reduced. off of doug richie, who heads up energy, he's also gone. so i think this is in the context of the current move, that there is more corporate accountability. this is a slip down for the poor handling of that merger. i think this is a sign of the times. and i think with a new guy, sam walsh, well regarded by shareholders, he's a long-term
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employee. >> he's the operations guy, right? >> correct. >> what we're doing here with rio is what we've done with bank ceos is get guys in and know how things work. >> yeah, but look, albanese has been with the company for 30 years. you could equally look at that as the period that's not normal. i'm not sure, even today, whether that acquisition would have made sense. >> but it's where we're at now that the outlook for iron ore is looking better, china has not fallen off a cliff, and rio tinto are talking about ramping up production by about 15 odd percent. so there's an element of, i guess, luck in any transaction. that's the simple reality.
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something substantive with the tsc, we could all look back and say the roots were there, but -- >> just remind them of what you're talking about. >> well, the global financial crisis. >> what everyone wants around here. what is interesting is to question where this leaves a company like rio going forward. takeover talks, merger talk? what's your view? >> i think in terms of the size of rio tinto, that takeover merger is unlikely. but i think we have to actually look at rio tinto and bhl billyton, that they have, notwithstanding, the problems that had the impairments or write-downs. but the realities of balance sheets are very solid. i think the problem is going to be addressing the costs of the equation. something that indeed sam walsh,
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i think is well regarded with shareholders to do a transparency on the cost side. that where the next acquisition will come from. >> do you buy? >> absolutely. we like rio tinto. >> all right. we'll leave it there. rupert nation, thanks so much for coming by. airbus management are currently unveiling their 2012 commercial results. they've talked about taking 914 gross orders in 2008, 133 net orders. as far as 2013 are concerned, they're targeting 600 deliveries and around 700 gross orders. fabrice is talking there, as you can see. now, japan is home of the most recent incident that's led to the groupeding of the boeing 787 jets. fushiko has the latest from tokyo.
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>> hi, kelly. the japanese government order japan airlines and nippon airlines to ground all their 787 dreamliners today until the safety is assured. japan airlines canceled some 850 flights. ana canceled 35 domestic flights since it only secured alternative jets for 26 of its 61 daily flights. the dreamliner saved as much as 20% on fuel, the use of less fuel efficient planes could have a big impact on the carrier's earnings. if this problem lasts longer, both carriers may have to rethink their routes. the stock prices of companies involved in the dreamliner project fell across the board today. ana and japan airlines dropped during the day. ana ended .5% lower. japan airlines managed to pull into the green by the trading day's end. the components prior to the dreamliner were also lower.
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the batteries sell almost 5%. after markets closed, the firm said its own probe into the issue could take weeks. and the carbon fiber industry down nearly 2%. back to you, kelly. >> fushiko, thanks very much for all of that. just wanted to remind you here that poland is grounding its 787s on the recommendations and says the delivery will depend on safety. although it expects more delivery so far right on schedule. it's a different story in south korea where there are no dreamliners in service yet. be korean air is standing by its decision to order upgraded 787s. chery kang is in seoul and joins us with the issues there now. chery, some concern although it sounds like they're still pressing forward. >> exactly. korean air is the only 787 customer here in korea. its shares were under water today, somehow reacting to that
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development. the airliner felt the need to explain, though, the difference between the dream liner boeing 787h model that was grounded yesterday and the model that it plans to adopt, which is a 7879. it is the official statement, korean air saying, the model is the upgraded version of the model this time. it adds by the year 2016 within korean air thinks that all the problems will be solved. it is adopting 10 aircraft of this model starting in 2016. guys, back to you. >> air india is the latest airline to ground its fleet of dreamliners. india's aviation regulators kept their six planes on the ground until the investigation is concluded.
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sandia, what are people saying over there? >> thank you very much for that. remember that after that faa decision, the ministry of civil aviation in india as well as the civil aviation authority have decided to ground all dreamliner necessary india. there are about six dreamliners at the moment flown by air india which is a government run airline in india. what this means for air india is that it's come at a very bad timing. india is sitting on a lot of almost 3,000 rupees and in excess and was looking at these dreamliners as one way of bringing down its operational costs. now, people that have been speak, analysts and experts in the industry tell us there is no clarity on just how long this issue could probably take to get resolved and, therefore, meaning that the financial team for air india has been extended just a little longer. back to you. >> okay. thank you for the latest on
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india. now, the faa in the u.s. has issued an order temporarily grounding all u.s. registered boeing 787 dreamliners pending safety checks on the jet's batteries. united is the only usair line with dreamliners in its fleet. before we get into more with those discussions, do we want to bring up the news on spain which is out with the latest bond auctions? >> yes. three issues today. spain sold effectively 1.5 for 2018. add haas together, that's 4 billion and 512 million in 20411. if i add that altogether, what did i say, 4 1/2? that's 4 1/2 in total, which is what we were looking to raise. just about 4.5 billion. have we got the yield? >> the three-year, the yield is down under 2.8 and about 3.4 last time for the 2018 been for the five-year, 3.8 versus 4 last
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time, so less of an improvement. the 2041 yield coming through at 5.7. the last time that one was out just over 6%, although that was earlier in 2011. >> yields are lower across the -- yields are lower across the board, as well. and they've raised the amount that they wanted. i haven't seen a bid to cover. let's get a little bit more. >> bid to cover is a bit lower. >> yeah, on the 2041. bid to cover, 2 versus 4.81. the bid to cover is low, but yields are down, as well. joining us with his thoughts, jonathan, they've raised the targeted amount. yields are lower. and as i understand it now, they've raised now about 9% of their medium to long-term issuance plan for the year. how much longer can they take advantage of these lower spreads and yields? >> probably for quite a while. there has been a fundamental shift change in sentiment with regard to the eurozone.
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this offers tremendous benefits to peripheral countries. the spanish government has been in a sense while the sun shines in the first step of last year. they got well ahead of its funding program. this year as you indicate, it seems to be pretty much on track. it has 120 odd billion to sell of government bonds this year. it stands just about 10 billion in the first month. so pretty much on track. and i don't know whether that's a positive or a negative. in some ways, you would be hoping that the government would be trying to get well ahead of its funding program at the moment. but paradoxically, it may be a sign that they're fairly comfortable with things going forward. >> yeah. and we've got italy raised nearly 10 with a short target, as well. you say they could last quite some time with these narrow spreads. how long? what might change? >> i think the -- as i said, there has been a fundamental shift change in sentiment, i
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think, with regard to the eurozone. and in a sense what's happened compared with, say, a year to 18 months ago is that previously the markets perception was that many peripheral countries pretty much sit on their own, you know, trying to achieve the criteria to be part of the single currency. but now there's a sense with the ecb's intervention, the o&p strategy, there's a much stronger sense of support for these peripheral countries. so that is a fundamental change that's benefited these peripherals. the big risks going forward relate to the stability, political unrest, the political uncertainty in that. you know, if we see an ongoing grind lower in growth across the eurozone and countries in particular, that presents some risk with regard to political change of these countries which, you know, ultimately in extremists they begin to
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question whether continued membership of the euro is in their domestic interests. but we're quite a ways away from that at the moment. but the outloor to gdp in the eurozone this year is very depressed and for next year. and i think the market has been increasing over the course of the year will be focusing on political situations in these peripheral countries and also social issues. >> thanks for that. >> noisier behind him than i've heard it in quite some time. you can tell there's excitement on the trading floor. stick around, because coming up on the show, the world cup is coming up to qatar. how much can they expect with hosting duties?
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we are dominated in the airline sector, news of boeing's 787 dreamliner grounded and airbus did a little more in 2012 than we expected. 914 gross orders. we've had comments from the airbus ceo this morning saying that the dreamliner grownings is
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a sign of tough safety standards. joining us with his view, michael burns, head of aviation departments. wa do you think the airbus ceo is trying to say when he talks about the dreamliner grounded? it's a sign of tough safety standards. >> i think we're entering a new era with new aircraft type platforms and probably the greatest demand for new aircraft than we've ever seen before. and i think there's two key drivers for that. we have a driver which is especially in asian markets african markets and latin american markets, but also because of the efficiencies that these new issues are bringing in terms of fuel efficiencies, airlines are desperate to get ahold of these aircraft in these tough economic times. so at the same time, you have that pressure where regulators are looking at continued improvement in terms of safety and they are prepared to -- and
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they're prepared to make the rules. >> is there such pressure in the new aircraft? cracked wings in the a380. they're pushing the envelope of aircraft design. big battery problems with the dreamliner. there seems to be a suggestion that, look, 20 years ago, we might not have grounded these planes for these battery issues seems to be the sentiment that he's saying. is that right? >> i'm not an aircraft engineer. i think what's important is that safety is paramount and that's recognized by the regulators and the manufacturers. and they recognize that is their key driver, safety to passengers. >> let's talk about how much is at stake. we have huge back loads for aircraft for boeing and as of july, what is it, over $1 trillion worth of aircraft? >> that's exactly right. >> so i wonder if there's a couple of things here which could result in significant cancellations. one is that a lot of this is
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spurred by higher oil prices and the outlook for those is for them to come off a little bit. the other safety concerns, the other the fact that you can get other aircraft out there that maybe won't cause so many headaches with japan airlines not having to take an earnings issues off this. >> the airlines require more aircraft. so boeing and airbus are in the position to supply those aircraft. there is really no other competition there above the 126 category. at the same time, a lot of these orders were put in place and these efficiency baked into the airlines' plans several years ago before we saw the recent rise in the oil price. oil prices will be higher than the longer term expectations in the industry. >> are we seeing a big cleaning out of oler aircraft?
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>> historically what you used to in the emerging markets, you would say second hand aircraft trading quite strongly. what you're now seeing is emerging market airlines growing rapidly looking for saflgs with the new aircraft. so the mark of second hand and older aircraft is falling. the demand for new aircraft that has those savings built in, it's higher. >> we're going to talk more about it. come back and do that. thank you. >> thanks very much for coming by. europe has been the latest to say it's grounding 787s. now there's other news to get to this morning. qatar's spending spree celebration for the 2012 world cup is bringing along business for many companies. but the chief executive of doha bank is calling on the government to ensure equal opportunities. usef gamal is in dubai.
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what can you tell us about the move there as we build up to this big event? >> hey, kelly. it's a fascinating story. the numbers are staggering. the government is talking about $130 billion that would be spent in the run up to the world cup in 2022. and that's just the infrastructure component. that means opportunities for local players and international players, as well. of course, some local players are worried about how this money is going to be distributed and one of them is the chief executive of doha bank. he's hoping that one of the shareholders in the bank, the sovereign wealth fund of the qatar investment authority is going to help out in dividing up this pie. of course, the qia is famous for its stakes in the london stock exchange and football clubs in france. is and here is what the chief executive had to say about what role the sovereign wealth funds and the government play in dividing up things. >> the government has to come to
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all the local banks. unfortunately our part is very, very limited. and we are requesting the government authorities, finance minister to look objectively and see how to -- this business. hopefully there will be a balancing act. >> the chief executive told me that tease very bullish when it comes to the emerging markets in asia and he's looking forward to doing more business in india. so make sure you tune in tonight, ross. maybe a few ideas on bow ties. >> we'll see what happens. thanks for that. "worldwide exchange" continues in just a moment.
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welcome back to "worldwide exchange." if you're just joining us, i'll kelly evans. >> and i'm ross westgate. here is a reminder of headlines today from around the world. >> boeing hits more turbulence as the u.s. grounds all 787 dreamliners pending problem resolution on its batteries. rio tinto shocks the market with a surprise departure of ceo tom albanese as the mining giant books a $14 billion impairment charge. and bank of america and citi group report earnings today with the bank mortgage wears expected to weigh on the figures.
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>> announcer: you're watching "worldwide exchange," bringing us business news from around the globe. good morning and welcome. let's take a quick look at u.s. futures as we gear up for the trading session across the pond. the dow is looking to shed about 25 points before the open, the nasdaq is roughly flat and the s&p 500 same story. we mentioned the dow transports tat an all-time high. the question is how sustainable will these numbers be? we'll keep an eye on these figures. overnight, news has been generally supportive. the cnbc ftse 300 is up about .1%. in europe, the euro is rallying against the pound. take a look at european bourses. some differentiation, not a ton of action. the ftse down just a touch there. ftse so is 1 is its level. the cac 40 is adding about .3%.
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same story, it has been a morning dominated by corporate news. to your point, perhaps that's a lot of progress. >> absolutely, right? and you mentioned there's a spanish bull action going pretty well this morning. nicholas is suggesting sentiment towards spain is now better than it was when we had the lcro impact. continue-year spanish yield is getting down below that 35% mark, which is the lowest we've seen since the end of the last year. yields on the three issues, 2015, 2018 and a small 2041 issue. coming down across the board, as well, which means that spain is now effectively raised 9% of the medium and long-term issuance target to the year. italy raised nearly 10% of their long-term issuance plan. so sentiment still remains fairly good for spain and italy,
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as you can see. on the currency markets, that won't be too bad for the euro and it continues to climb in the session up to 1.3350. we couldn't climb above 1.34 last week. we'll see where we go. dollar/yen, 89.14. that's where we stand right now in european trade. let's recap that asian session. sixuan rejoins us from singapore. sixuan. >> thank you, ross. a mixed day of trade for asian bourses. investors remain cautious. the shanghai composite lost about 1% today. credit suisse downgraded china life. mingling developers dropped 7% after share placement.
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taeiex down about 1%. after the bell, the world's largest contract chipmaker posted a 32% jump in its q4 profits meeting forecasts, but the company expects q1 revenue to fall due to seasonal factors. we'll see how these shares react tomorrow. elsewhere, the nikkei finished just a touch higher. sharp shares jumped over 7% on the back of tv joint venture talks. trophies from selling sharp's china factor could help keep the balance sheet afloat. and down under the afs 200 climbed to a 20-month high after another rate cut after fairly weak job status.
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hcl technologies valued to some 12-year high as its q4 earnings reached forecasts. that's all from me. back to you. a little news out of qatar with regard to boeing. qatar airways says it's grounding its boeing 787 dreamliner until further notice. we were earlier discussing who had the dreamliners. we had heard from india, japan and the u.s. >> and we hadn't heard from qatar and i think if europe is grounding it, asia is grounding it. how can you keep flying if everybody else around the world has grounded it? >> and now some of the other airlines are saying they could see a financial hit for this. >> poland loss says it's significant and they will seek to work out a cost and file a compensation claim for boeing. >> and this gets really interesting for boeing.
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can we show boeing shares? we know yesterday they were down about 3%. the federal aviation administration has issued an order pending safety checks on the plane's batteries. >> the faa says the cause of the battery failure is still unknown and united is the only usair line with dreamliners in its fleet. there could be more trouble for boeing if it's engineers go on strike. tension near's union presented its best and final contract offer on wednesday. as we mentioned, boeing shares were down about 3% earlier. they're off a little bit more now, but just 3.6% and just want to further explain what's happening with japan, transport safety board officials having inspected one of the bat i res in question said it had turned plaque, yellow and swelled and was 5 kilograms lighter than before.
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the cause of the incident that we fist heard about midweek will be out in a year, but the timeline being somewhat of an issue. >> yeah. at the moment, the flights are understand grounded. >> those, that was the latest we heard, through the 25th. meanwhile, despite all the problems with the dreamliner, boeing managed to be the top plane seller in 2012. airbus booked 914 orders for the year in 2012. the head guide is somewhere above 800. besides airlines, miners are in focus, as well. rio tinto stock opening lower this morning down 2.7%. the ceo announced he's going to step down. the announcement follows an airline charge. matt taylor is in sydney.
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it's getting pretty late into the night. matt, we appreciate you hanging on. how is this being viewed? clearly, no one is expecting the write-downs, i guess, from mozambique. explain what's happened and whether people may be reviewing the replacement as a good thing. >> yeah, well, i'll get to the replacement in a moment. but let me just tell you about what exactly transpired. we got news after the australian market had closed up trade for the day, which is why we're following what's happening on the london listing now, down by about 2%. but the stock opened closer to 5% when trading a few hours ago. rio tinto announcing a $14 billion impairment on its 2012 results. 3 billion of that associated to its riversdale rio tinto coal acquisition in mozambique which is made in 2011 and $11 billion of that associated with the
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carrying value of its aluminum business. the company saying that a deterioration in the aluminum markets in 2012 because of strong currencies in certain regions, also higher energy and raw material costs have had a negative impact on that sector within the miner's operations. as a result of this significant write-down, tom albany has resigned with immediate effect, the 16th, which is today, his last day in that top job. sam walsh of the iron ore division, he will be taking over, as well, immediately. in 2007, they made that acquisition of alcan at the top of the cycle. they then had to sell off many of those assets and about a year ago announced the $1 billion.
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the iron ore business is growing exponentially. they have some fairly aggressive plans for growth in the northwestern part of the country. some concerns about his age, he may not be seen as a long-term candidate as the ceo. he's been around for a miner for a long time. so the initial concerns are this may be temporarily when it comes to the ceo replacement. >> matt, thanks for that. and the third big news item to watch for this morning, another pair of big u.s. banks reportings for the opening bell. bank of america is out with results at 7:00 a.m. eastern. and citigroup will follow an hour later, reporting fourth
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quarter figures at 8:00 a.m. eastern and it's the first quarter under new ceo michael corbett. analysts expect 90 cents a share on revenue. like bofa, citi is taking charges related to the government's foreclosure settlement. by& a and citi shares, you can see both of them moving higher. almost up 2% while citi is down by about .1%. >> hi. >> hi. >> what do you think accounts for the fact that bank of america is doing so well this morning? >> maybe people were expecting some pretty low numbers. i don't know why. >> how important is the legacy of the mortgage settlements weighing on the fourth quarter as opposed to being an issue that can finally get behind them for 2012? >> the bank of america had more
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previously numbers. so i think as we move into 2013, you know, issues with fannie mae have to be settled. issues with other private sector banks have to be looked at and you have to try and say what is the value of that mortgage? but i think now we're seeing a better story on the housing market in general. the banks should be want to go draw a line on to some of their past complaints. >> and u.s. bank was the one that disappointed yesterday relative to jpmorgan, goldman, the investment banks were doing better. is there a reason to call into question how healthy underlying earnings will look from these pure play banks? >> look, i think the key for some of the big numbers from banks, the uplift performed last year was superb. liquidity is flushing around. in terms of the broad national banking sector, it's going to be a -- we're seeing a continued long workout process. this is where we've seen impairment charges coming through with previous issues on
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mortgage lending and so on. and i think what happens in this sort of '09 to '11 period, we saw that terrible phrase, a lot of kicking the can down the road, even in the banking sector. they clearly were trying to smooth the processes and taking the charge on their mortgage book. i think that they're looking for growth opportunities and, therefore, we're wiping away that part of the state, look forward and start that with a better slate. >> is there a better way to play that housing recover with the banks? as you say, their valuation levels are scratched? >> i think the home builders would obviously be one, as well. and i think there's the key point we would make about the housing market in the states is that we're coming off the bottom here. but when you look at the performance of the housing sector share price, when you look at the performance of the actual building of new houses compared to some of the nahb index, it's kind of up with events.
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so i think that on those recoveries there, just take a little bit of a backwards step and it's kind of in the price. what i think is key for the u.s. economy is if we are seeing an improvement in the housing market, then this is going to be good news for the bank and the broader economy. and when we look at the u.s. compared to, say, europe, we aren't seeing any signs of growth in europe. and if you're going to be bullish on europe from here, you've got to start seeing growth and earnings come through as opposed to sit there and saying the risk has been removed. that was last year's story. if you're going to add performance in europe, we need to see the growth coming through and we don't see that. >> joe, stick around. we're going to get your view on this story coming up. coming up, goldman says this year's flu epidemic could very well have an impact on the economy. >> we'll have all the details on that when we come back. ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪ into a scooter that talks to the cloud? ♪
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yes, you are watching "worldwide exchange" and these are your headlines. boeing's dreamliner facing more groundings around the world. rio tinto rattles markets with a surprise departure of its ceo. and investors gear up for another round of bank earnsing with citigroup and bofa on tap before the u.s. open. >> more on those stories still
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to come, as well. first, the fda has approached a new type of flu vaccine that doesn't use eggs or the live flu virus in production. flu block uses dna technology which allows genetic material to be produced artificially and that offers the potential for faster start up of production in case of a flu pandemic. flu block has been approved for people ages 18 through 29. >> this comes for the fallout of the flu season that arrived earlier than in previous years. according to goldman, quarterly average hours were depressed by 0.05 hours in the first quarter. the rate of real gdp growth might be 0.4% lower. and i believe those are both estimates for the first quarter of 2013. stu richardson is still with us. how do you factor in your model
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the impact of flu season in the u.s.? >> we haven't factored it in. i think the key point is certainly in the first half of this year is going to be another -- call it muddle through stalled economy. we got over the fiscal cliff at the end of the year. everyone knows about the fiscal position with the debt ceiling and spending negotiations still yet to really happen. and this is just another headwind that the economy seems to be having to face. with that in mind, you know, people are getting optimistic that we'll see a second half recovery. but that's almost in a way hope. there's nothing out there which really -- >> i've said it before, and i'll say it again, but i've heard the second half recovery issues every year. >> every year since the gfw. >> and to be honest with you, we're not seeing anything tangible out there which would indicate, yes, there's definitely going to be a second half pick up. we're expecting 2% growth this year overall. i think the risk is on the down side as opposed to the upside.
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>> how do you trade that? do you stay away from stocks? >> well, yes. at the moment in short-term, yes. we look at the economic growth potential pushing the rating up and with the corporate earnings still mixed, we think fundamentals are a little bit vulnerable. we think sentiment got quite bullish, which is normally a contrariry sign and we think from a technical point of view the market is tiring and is vulnerable to a correction, as well. so certainly be a little bit careful on the u.s. equities and by extension i guess therefore european equities in the next couple of months or so. but, really, we're seeing a lot of opportunity not on just within the equities space, but also within the currency space, as well. >> let me guess, the end. >> no.we show profits on our bearish position at the start of the year. we're happy there. but i think the key point was going back to the fed minutes released on the 3rd of jan. this is a number of the committee members saying, you
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know, we could see a time horizon by tend of qe maybe sometime this year. if that's correct, then that's a potentially big thing for the foreign exchange markets. so if we get something like this, say q2, probably q3 type either winding back or cessation of qe dollars, that is going to be major. >> in what cross rate? how would you play it? sorry. >> at some point, you want to get that dollar/yen trade back on. >> okay. stewart richardson joining us all morning. really appreciate your time, stewart. partner at rmg wealth management. we want to update you on the hostage situation in algeria at that jointly on stat oil/natural gas plant also owned by the algerian gas entity there. in any case, 30 algerian host aemgs from escaped from kidnappers at the at that time. bp says a number of staff are
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among those still held. the company says the situation at the site remains unresolved and fragile. there you have the threat, the situation is still fragile. ebay is kick off the earnings season with better than expected numbers thanks to booming consumers using their phones and tablets to show. >> will that bode well for the rest of the sector? we'll break down the numbers when we come back. ♪
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let's recap some of the story we're following today. results beat analyst forecasts for ebay thanks to a boom in consumers using mobile devices. ebay out with strong results after the bell yesterday. wall street was log for results around $3.9 billion. ebay turned in 3.99 billion per share. guidance, not quite as rosy as wall street was expecting. they wanted $3.79 billion in revenue for the current quarter. 63 cents in eps. ebay got into a mid point of just $3.7 billion and 61 cents in eps. but wall street seemed to decide ebay is always conservative, shrugged off that conservative
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guidance and sent the stock up after hours. a little bit of detail in what happens to you for ebay during the holiday quarter. the u.s.-marketplace business was particularly strong, up 19%. pay pal strong. total payment volume was $41.5 billion when a lot of analysts were expecting closer to just 40. and looking forward, mobile continues to be a very important part of the story. ebay nearly reached $14 billion in mobile payment value in the pay pal business for 2012. ebay's ceo john donahugh says he expects that to be the top for 2013. also looking forward to the 2013 saying the marketplace business would be back in line with where ebay had projected in terms of margin. growth was strong, so they're going to be investing in driving growth particularly in brick countries. also pay pal continuing to be in line with aggressive
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expectations, the gfi business, as well. lfk, on closing bell, maria will be an interview with the ebay ceo john donahue. >> still to come on the program, a top federal u.s. regulators are still dragging their feet on the too big to fail issue. they've called out several banks that should be overhauled to protect taxpayers from future bailouts. we'll get the opinion of the former fdic chairman bill isaacs, strayed ahead. ♪ [ male announcer ] how could a luminous protein in jellyfish, impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average.
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welcome back toe "worldwide exchange." i'm kelly evans. >> and i'm ross westgate. >> boeing hits more trouble as the u.s. grounds all registered dreamliners pending investigations on its batteries. >> despite its problems, boeing managed to top airbus as the world's largest plane orders. rio tinto shocks the market with a surprise departure of its ceo tom albanese as the australian mining giant announces it will book a $14 billion impairment charge. and mortgage lows are expected to weigh on results of the bank earnings released in
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the u.s. today. the dow is down about 25 points. the nasdaq and s&p 500 taking fair value into account are flat to barely higher for the morning. no doubt, transports have been e s&p 500 has been at five-year highs. the question now becomes what will earnings season do to further these gains? a couple of banks in focus this morning, of course, as we mentioned, bank of america and citigroup. that will be a big tell in terms of how these markets open. take a look at what's been happening overnight. the ftse cnbc global 300 is generally up 4 points. the ftse is down by a little more than .1%. the xetra dax lower by .3%. underperforming in europe. the cac 40, they'red aing about
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a third of 1%. the ibex in part by its debt auction went reasonably well today. >> meanwhile, let's bring you up to speed with some of the other stories we're following. dallas fed president richard fisher seas ice conceptual about any further bond buying by the central bank. they've taken qe3 and helping the economy is fading. the facebook notes u.s. economic is picking up modestly, but conditions haven't changed. fisher addressed the too big to fail issue, saying regulators should restructure big u.s. banks to protect taxpayers from the cost of future bailouts. it identified 12 banks that are too big to fail and that included citigroup, jpmorgan and wells fargo. bill, good to see you. thanks for joining us early this morning. do you agree? >> nice to be with you.
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>> do you agree with the comments that we heard out from mr. fisher? >> i'm -- i couldn't hear all of what you are saying about his comments. i think if he's saying that the -- i thought i heard you say that the economic activity is picking up modestly, and i believe it is. and i believe the banks are doing reasonably well. >> yeah. particularly on the point he was saying that we still haven't addressed the too big to fail issue and regulators should restructure big u.s. banks to still protect from future bailouts. he's identifying 12 major banks. >> he's saying that -- i'm really having trouble hearing you. he's saying we should restructure the large banks? >> yes. >>. >> primarily because we still
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haven't faced the too big to fail issue. >> okay. now i'm hearing you. yes, i agree that we haven't dealt with the too big to fail issue and the large banks have a major funding advantage over the smaller banks because people perceive them as too big to fail. wa to do about it is the question. and there's going be a debate in this country about that. the u.s. senate has just asked the general accountability offers to do a study of the too big to fail subsidy. i don't know that they're going to come up with necessarily regulation owes what to do about it. i think they will find there is a big subsidy. this is an issue that will be in front of us over the next year or two as we try to figure out how to deal with it. >> bill, the real question is what do you do? we've seen a lot of reform, a lot of regulations, a lot of issues in dodd frank trying to address this. what are the top three
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priorities in your view for making the banking system safer? >> the -- we've had a tremendous amount of new regulation imposed on the banking system by dodd-frank. no question about that. the law itself is 2,500 pages. most of them missed the point. for example, we haven't dealt with the too big to fail issue in an adequate way. we haven't dealt with fannie mae and freddie mac and the housing in an adequate way. we have too many regulators that are -- the system is too frag managemented and it's too poe lit sized. there's a lot of things we should have done ta dodd frank didn't do. i'm all in favor of very strong regulation, but we didn't get it with dodd-frank. i think with dodd-frank all we got was excessive and ineffective regulation and we haven't fixed our system.
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>> wa about the inof banker pay? is it structured in a way that creates problems and different vulnerabilities within the banking industry? would you reform it? and how so? >> i couldn't quite hear that question. we don't have a great connection the. >> sorry, bill. we apologize for all the issues. i lastly wanted to ask you about banker pay. compensation is in focus here. does it need to be reformed? if so, how? >> i think i heard you talking about compensation and the fact that we are not regulating it properly. and it's still too high. i don't know that i agree w that. i think we have made significant reforms in the way executives are compensated. sitting on the board of a bank, i can tell you that the directors are very much involved as are the regulators in terms of how the campaign plan operates and try to get some of
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the incentives for risk taking out of that system, fallbacks and things like that. so i think that we have reformed the compensation system. >> okay. we'll leave it there in part because of our technical troubles. bill isaac is head of global financial institutions. we're going to try to work on that connection, bill, and come back to you in just a couple of minutes. >> yeah. we'll try and fix it. and as the dreamliner joins us with a virtual nightmare, phil lebeau joins us right after this break. [ male announcer ] how u make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission? ♪ whatever your business challenge, dell has the technology and services to help you solve it.
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welcome back to the program. there are a couple of stories you should check out on our website today. one, should we have to work until the age of 70? some ceos in the u.s. think so and they're urging congress to raise medicare and social security eligibility to 70 from 67. there's plenty more on our website. also, president barack obama has unveiled sweeping gun control. he wants to ban military style assault weapons and do tougher background checks. the u.s. national rifle association is prepping for, quite, the fight of the century against the plan and there's detail on that, too. conservatives are telling the tea party to stop using the debt ceiling crisis to force major spending cuts. can washington stop bickering? and does the gop have a problem
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on its hands? for more information, head to our website. >> and we spent a lot of time talking about corporate news today. may be an indication that the analysts are seeing more about what's going on in the eurozone as evidenced by the spanish auction today. they're writing in and suggesting sentiment now towards spain and italy is better than it was this time last year when the rto was in full swing. and another auction this morning across three issues, 2015, 2018 and 2041, spain raising the maximum 4.5 billion target. and yields lower akro cross the board, as well. which suggests that the convergence trade is now continuing, as well. they've now raised around 9% of their funding for medium long-term debt targets for the career. italy raised around 10%. the spread continues now. ten-year yields coming back down towards that 5% level. we did get below it at the end
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of the last week, the lowest we've seen since march of last year. kelly. >> ross, thanks for that. extraordinary to see those levels. boeing dreamliner faces more groundings around the world as the company's top rival airbus beats order targets. rio tinto rattles markets with a surprise departure of its ceo as the miner takes a large impairment charge. sxin investors gear up for another round of bank earnings with citigroup ask bank of america coming up. now, qatar airways has become the latest airline to ground its boeing 787 dreamliners. united is the only usair line with dream liners in its fleet and boeing shares have taken it on the chin on this news. they're now down better than 4% in frankfurt trade. phil lebeau joins us now on the
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phone from chicago with the latest. phil, thanks again for joining us. we've been working you overtime all week on this story, but the details keep taking a turn for the worse for boeing. >> they do, kelly. and i think the problem here for boeing is near term and long-term. near term, you want to get past this air worthiness directive as quickly as possible. there has been some suggestion that perhaps boeing engineers working along with the faa could get this air worthiness directive lifted maybe within a week. but i think that's fairly optimistic based on a few people that i've talked to. having said that, even if they can get it through in a week, there is the other issue which is will there have to be some changes made in terms of the engineering of the dream liner? and if that's the case, wa impact does this have potentially on the boeing manufacturing process? remember, they're going from five dream liners per month up to ten per month by the end of this year. if they have to slow down that production schedule, they're that's going to have an impact
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on their financial results later this year. so they're under the gun right now. further complicating this, guys, is the fact that they are in the middle of the negotiations with their engineer's union and the engineer's union has come forward and said, we have given you our best last offer. if you're not going to take this, then we've come to an impasse. those are the guys that know the dreamliner better than anyone else. >> the timing is so unfortunate. but we appreciate your timing this morning and we'll continue to follow all the details. phil lebeau out of chicago for us. phil, thanks very much. >> continuing story. despite all the problems with the dreamline were boeing still managed to take the title of biggest airplanemaker for 2012. this is after rival airbus posted a 43% decline in orders. but the stock is up.
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stephane has the details for us in europe. >> better than the forecast of airbus, indeed, the company was planning 650 gross orders to the last year and indeed it had 853 net orders. but still, it's significant -- with boeing because last week, two weeks ago, the planemaker posted 1,300 growth orders. in terms of deliveries, 588 last year for airbus. and 601 for boeing, for the american planemaker as regained its crown as the largest planemaker for the first time in more than ten years. in a press conference this morning, they were saying it was higher indeed. it's a significant drop at the time airbus was able to collect more than 1,600 gross orders.
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but there was a sharp decline last year. that was the main announcement this morning. airbus is targeting 700 gross orders for the year, including super jumbo 380s. airbus made some comments about the problem. it's very, very unusual. planemakers usually never comment on the products of the competition. they never comment on technical problems. just a few minutes ago, the ceo of airbus wished boeing all the best to resolve the technical problems of its 787. >> okay. thanks for that, stephane. coming up later on cmt, we'll hear from the airbus chairman followed by the company's ceo, fabrice bregier.
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company shares rio tinto weighing on shares. plenty of analysis when we're back.
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another pair of big u.s. bank earnlings result before the opening bell. bank of america is out with results at 7:00 a.m. eastern. expected to show revenues down 15% earlier. then citigroup reports its q4 numbers at 8:00 on a.m. eastern. this under michael corbatt. analysts expect revenues of 8.8
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billion. citi will be taking charges related to the government's foreclosure settlement. trade this morning up better than 2%. back with us is bill isaac, former fdic chairman global head of financial institutions at fdi consulting. bill, a quick comment from you on bank earnings. cb&t numbers out. they beat a little bit. do you think that the sector generally is healthier today than a year ago? >> oh, i think the banking system is much healthier than a year ago. there is still a lot of headwinds on earnings. in significant part, the enormous regulatory burden that has been imposed on the banks plus the economy. and regulators have been pushing the banks to raise their credit standards. i'm a little concerned that a lot of the earnings in the past
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year or so have come -- in the last couple of years have come from bringing back into the bank the excess reserves that were taken during the crisis. that's been an important part of the bank earnings. and then the mortgage re-phi boom in this interest rate environment has been a boom in the past couple of years. those are going to expire at some point. with interest rates where they are, it's difficult for the banks on margin. there's no question the banking system is much stronger, earning better and is has much higher capital and liquidity than it's had probably forever almost. >> you know, well, that's quite a statement because there's a lot of people who would still say banks shouldn't necessarily be turning around and handing capital back to shareholderses. would you agree that given the improvements we've made, it's time for them to be allowed to go forward? >> i think that the banks have accumulated so much capital and
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that they really don't have a good use for it in light of the lack of qualified loan demand. i'm not saying lack of loan demand because there's a lot of loan demand. but the credit standards are much higher and you don't have much to do with the capital. so you have to give it back if you don't need it. i'm talking about toous banks. it's not true around the world. the u.s. banks have very high capital ratios, the large banks, much higher than they've had as far as i can remember and i go back a long ways. >> bill, we'll leave it there. bill isaac, appreciate your time this morning and hanging with us through those earlier troubles we were having. >> thanks for that. tim albanese is announcing he will step down as the ceo of rio tinto.
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we knew we were going to get a write-down for the mozambique business. it soems like we're compounding the era. >> first of all, i think the mozambique write-down was not a surprise. i think the timing was a surprise because it could have happened much later. and as far as how the news goes, i don't think it's going to change investment case on the stock. i think that the investment case right now in the short-term is being driven by oil prices. i don't think the new ceo will change the strategy significantly. sam walsh is a well known manager, well known by the markets. >> the new ceo doesn't change the strategy. why change ceos? i'm sorry, investment sentiment, why change ceos? >> i think there's a bit of --
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with with regards to the investment. i think that, you know, mozambique was very much usual the following and might say, it wasn't made up. >> so i'm reading between the lines. i think he stood up and said, okay, this looks like an acquisition and it's my fault. >> what about dividends? >> i don't think it affects dividends. it's a long cash charge. the story on dividends really is about cap ex for cash flow generation and that will be driven by iron ore and cap ex plans, which are -- right now they're high. right now cap ex is high, but it should come down in the next couple of years. >> and iron ore got whacked overnight. it's down 5%. what happens now? >> i think that's the main reason that the stock is down today. back in september, we saw the iron ore price go down to about
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87, which is well below the marginal cost of production which i estimate to be around 120 to 130. the increase from about 87 to about 160 was driven by fair value change which after a period where stocks were far lower than usually. we expect the seasonalal restocking so end by the chinese new year, which traditional additionally it has been for the last ten years or so. >> what is the target now for rio? >> target in terms of -- >> performance, share performance. >> i think weak in the short-term as the iron ore price comes down. in the long term, it should be more than other carriers. it was good operationat management. it should do pretty okay for the rest of the structural. what if it doesn't have any more
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value for that. now, just as we turn to the u.s. jaentd, here is what we're looking for today. jobless claims are out at 8:30 a.m. eastern. down by 370,000. we'll get december housing starts at about 3.5% to 890,000 annualized pace. permits, though, are showing a small decline. at 10:00 a.m., the philly fed survey and we'll get earnings aside from united health. bb&t, blackrock, fifth third and pnc after the close. american express. you'll remember last week they preannounced that disappointment and intel. trying to keep people busy. >> as far as the futures are concerned at the moment, well, it looks pretty flat on the open. i think we'll call that a tepid start. that's it for today's edition of "worldwide exchange." "squawk box" is up next. we hope you have a profitable day. from kelly and i -- >> see you back here tomorrow. have a good one. what are you doing?
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